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Big Clubs will continue to spend big
If you are wondering why the huge “debt” doesn’t stop big clubs from spending big, the answer is quite simple. Here’s an analogy. Suppose the house loan mortgage for you is 5 million pounds. You are expected to pay half a million pounds as yearly instalment. Whilst you would be under “debt” of 5 million to the bank, your balance sheet would reflect only a negative of half a million. “Big clubs” can use this to their advantage given that they generate more revenue than the smaller clubs and can have their record books pointing to a bright future. After all, FFP is about how the club is going to move forward.
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Sponsorship Deals
Let’s take a look at Manchester City’s stadium naming deal. Etihad Airways and Manchester City had struck a naming deal of 400 million pounds over 10 years. At this point Manchester City hadn’t won the league for 44 years and were hardly what one would call “a successful club”; they were more of noisy neighbours, as a certain Sir Alex Ferguson would say. What’s more, Etihad Airways and the other sponsors of Manchester City, Abu Dhabi tourism authority, Etisalat and Aabar, are ultimately owned by government of the United Arab Emirates of which Manchester City owner Sheikh Mansour is one of the Deputy Prime Ministers.
Compare these sponsorship deals to Arsenal’s in 2004. They had a 90 million pound deal over 15 years for the naming rights of their stadium with Emirates. Now some may say Arsenal really needed the money to fund the new stadium and made the agreement a tad too early. But in 2004, Arsenal had just won the title without losing a single game in the season. Surely it makes sense for a sponsor to invest in a “successful club”.
To drive the point home Paris Saint-Germain are paid an eye-watering €200 million per season by the Qatar Tourism Authority,a sister concern of the Qatar Investment Authority that owns the club. In 2012, Chelsea started a sponsorship deal with Gazprom, a Russian gas and oil company with ties to Roman Abramovich.
Different Tax Rates
With the rules of FFP being the same across Europe, it is unfair to clubs in countries where the tax rates are higher. Especially with the emergence of Monaco (a tax-free haven), the other football clubs will have their mouths covered in sand.
Loopholes in the FFP
The FFP does not mention how it would tackle “related-party transactions”. Many eminent personalities, including Sir Alex Ferguson and Arsene Wenger, fear that clubs will unfairly enter into agreements which mean that instead of them paying a player £150,000 a week, they could pay half that figure and get a sponsor to pay the rest. This process is called a related-party transaction. With the deal happening between the club and a third party, it would be near impossible for UEFA to scrutinize this.
Economic meltdown in Italy
Italian clubs have simply been unable to comply with the FFP. Only eight clubs produced a profit during the 2010–11 season, with the rest of them making huge losses. Losing one Champions League place to the Bundesliga hasn’t helped the Serie A rake in the extra Champions League revenue it would before. The big 3 of Italian football – AC Milan, Inter and Juventus – were all bankrolled by wealthy owners. As Milan Vice-president Adriano Galliani bemoans, “FFP hurts Italy. There will no longer be patrons that can intervene. Until now people like Berlusconi and Moratti would be able to support us, but with the fair play it will no longer be possible.”
The Spanish Bail out
Despite Spanish teams being very successful in European club competitions and its national team being European and World Champions, Spain remained in deep financial difficulties, with soaring unemployment rates, increasing public debt and almost zero growth. Spain was reliant on the loans secured from the European Central bank amounting to 152 billion pounds, much of which was supplied by Germany on the condition that the Spanish government would use the funds judiciously.
The Spanish Minister for Sport, Miguel Cardenal, caused a huge stir by announcing that the government was looking to write off the €1.3 billion owed to the Spanish Government by La Liga clubs. This caused outrage in Germany with the Germans asking why they should pay taxes to cover the wages of Cristiano Ronaldo/Lionel Messi. With the likes of Uli Hoeness, the president of Bayern Munich, questioning the move, it does put FFP in very poor light.
Spanish Bank “Bankia” was one of the banks bailed out by EU. The same bank loaned Real Madrid the money to secure the services of Cristiano Ronaldo and Gareth Bale.
Ticket Prices
With UEFA pressing for self-sustainability, it doesn’t take Nostradamus to predict that the ticket prices will go through the roof in the coming seasons. The average ticket prices have already gone up at most stadia with Arsenal fans having to shell out the most.
Monaco have taken a unique step in this direction. With club president Dimitri Rybolovlev introducing luxury tickets that cost up to 2,000 euros, one does wonder how they will fare under FFP.
With so many pressing concerns about the FFP one does wonder if it will be successful. Right now all we can do is hope that UEFA will cover most of the loopholes and it becomes a fool proof scheme. Over to you Michel!
